Wendy’s/Arby’s Group Inc. is saying goodbye to the roast beef sandwich and may soon just be called Wendy’s Group.

The Atlanta-based restaurant operator is exploring strategic options for its ailing Arby’s brand, which is somewhat surprising given that the sandwich chain is starting to show some sales traction. Arby’s posted its first positive sales comparables in four years in the fourth quarter and profits have arguably troughed, according to Deustche Bank analyst Jason West.

He told clients that he is encouraged to see management taking action to shift resources toward the core Wendy’s brand, while taking advantage of increased M&A activity in the restaurant sector.

Mr. West estimates Arby’s could be worth as much as US$450-million, based on 2011 estimated EBITDA of US$56-million and a multiple of 6x to 8x.

Assuming some of the sale leaseback debt stays with Arby’s and a 25% tax rate, he thinks cash proceeds from a sale could be closer to US$220-million. However, the analyst noted that there may be no taxes on the deal since the business is being sold after a sharp profit decline.

Mr. West said the remaining Wendy’s business looks cheap relative to peers, maintaining a Buy rating and US$5.50 price target on the stock.

“The bull case on [the stock] was Arby’s was being valued at zero and Wendy’s could continue to see improving profit and grow internationally,” RBC Capital Markets analyst Larry Miller said in a research note.

Estimating that Arby’s could be worth roughly US$600-million, he told clients that selling Arby’s should improve both earnings per share and the P/E multiple.

Assuming a 6x EV/EBITDA multiple on its approximately US$100-million in EBITDA estimated for 2010, this implies the Wendy’s business is trading at 7.8x estimated EBITDA for 2011. Mr. Miller pointed out that this would be a discount to the group at 8.5x.

“Selling Arby’s and improving comps at Wendy’s (along with an improving economy) should result in [the stock] trading more in line with its peers,” the analyst said.

To him, that suggests a stock price of about US$5.30, or another US$320-million in market cap – “not quite zero for Arby’s but close.”

The stock climbed nearly 7%, or US31¢, to US$4.78 on Thursday after the announcement.